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Screening in a Matching Market

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  • Inderst, Roman

Abstract

Contract design under incomplete information is often analysed in a bilaterally monopolistic setting. If the informed party's reservation value does not depend on its private information (its type), it is a standard result that the uninformed side offers "low" types distorted contracts to reduce the information rent left to "high" types. We challenge this result by embedding contract design in a matching market environment. We consider a market where players meet pairwise and where, in each match, either side may be chosen to make a take-it-or-leave-it offer. As frictions become sufficiently low, we find that the set of equilibria is independent of whether there is complete or incomplete information. In particular, all contracts are free of distortions. Copyright 2001 by The Review of Economic Studies Limited

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 68 (2001)
Issue (Month): 4 (October)
Pages: 849-68

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Handle: RePEc:bla:restud:v:68:y:2001:i:4:p:849-68

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Cited by:
  1. Stephan Lauermann, 2008. "When Less Information is Good for Efficiency: Private Information in Bilateral Trade and in Markets," 2008 Meeting Papers 419, Society for Economic Dynamics.
  2. Aleksander Berentsen & Guillaume Rocheteau, 2004. "Money and Information," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 915-944, October.
  3. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer, vol. 30(2), pages 243-263, February.
  4. Seungjin Han, 2014. "Robust Competitive Auctions: A Theory of Stable Markets," Department of Economics Working Papers 2014-04, McMaster University, revised Apr 2014.
  5. Shneyerov, Art & Wong, Adam Chi Leung, 2007. "Bilateral Matching and Bargaining with Private Information," Microeconomics.ca working papers shneyerov-07-05-01-03-38-, Vancouver School of Economics, revised 01 May 2007.
  6. Matthew Baker & Ingmar Nyman, 2009. "Competitive Pressure and Lying in Search Markets," Hunter College Department of Economics Working Papers 426, Hunter College: Department of Economics.
  7. Holger M Muller & Roman Inderst, 2002. "Venture Capital Contracts and Market Structure," FMG Discussion Papers dp411, Financial Markets Group.
  8. Inderst, Roman, 2005. "Matching markets with adverse selection," Journal of Economic Theory, Elsevier, vol. 121(2), pages 145-166, April.
  9. Silvia Sonderegger, 2004. "Nonlinear Pricing and Multimarket Duopolists," The Centre for Market and Public Organisation 04/110, Department of Economics, University of Bristol, UK.
  10. Ingmar Nyman & Matthew Baker, 2012. "Job Hoarding," Hunter College Department of Economics Working Papers 437, Hunter College: Department of Economics.
  11. Shingo Ishiguro, 2010. "Holdup, search, and inefficiency," Economic Theory, Springer, vol. 44(2), pages 307-338, August.
  12. Inderst, Roman, 2004. "Contractual distortions in a market with frictions," Journal of Economic Theory, Elsevier, vol. 116(1), pages 155-176, May.
  13. Hao Li, 2003. "Price Discrimination in Matching Markets," Theory workshop papers 505798000000000028, UCLA Department of Economics.

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